The latest MEREDA Index, unveiled in late January 2016 at MEREDA’s Forecast Conference, comes in at 100, signifying solid performance for the last two quarters. As a key economic indicator for Maine, the MEREDA Index measures the pulse of the state’s real estate industry. It is the leading way the Maine commercial real estate industry tracks changes in the market.
While slightly lower than its immediate predecessor, “the latest number is reflective of the strong real estate economy, and is a very solid indicator of the strength of Maine’s real estate market,” said MEREDA president Michael O’Reilly.
“Commercial real estate activity continues to be a strong driver, with an overall rise of 2% over the first three quarters of 2015 — but, for the first time, residential activity was a big contributor as well, rising 9%” continued O’Reilly. “In fact, the individual components of the residential index saw sales of existing units up 14% and eclipsing the base year of 2006 for the first time. Median price, mortgage originations and residential permits were also trending upward.”
The commercial market comprises 50% of the overall Index figure. This portion has exhibited somewhat greater volatility than in the past several reports, although the overall index is up 2% over the first three quarters, led by a steady increase in the volume of commercial transactions (up 3%) and a firming up of lease rates per square foot (up 2%). The commercial square foot component has been the most volatile, falling to 92 in the first quarter and then jumping to 286 in the second quarters as several large properties were sold.
The residential market makes up for 40% of the overall Index. Sales of existing units (up 14% through the first 3 quarters of 2015) led the way in the first really strong performance in this portion of the Index in several years. All the other components also increased with the median price index up 4%, the mortgage originations index up 21% and new residential permits up 6% in 2015. While growing, new construction remains well below the level of 2006, meaning most housing demand is being met by existing unit sales, which is now above 2006 levels.
Construction employment, weighted at 10% of the overall Index, continues its lackluster performance. As of 2015 Q3, it stands at just below 80 and has not been above 85 since 2008 Q4.
The next version of The MEREDA Index will be unveiled at the organization’s spring conference, scheduled for May 17th in downtown Portland.
The MEREDA Index It is a composite of nine measures reflecting real estate activity in both new development and existing properties, in commercial and residential markets, as well as construction employment — all statewide. MEREDA has published The Index quarterly since the first quarter of 2006 and this current edition covers the Index through the fall of 2015. It is formulated for MEREDA by Dr. Charles Colgan, an economist with USM’s Muskie School of Public Service.